eBay's announcement late last year that it would stop
charging members of its developer community for
API calls grabbed headlines in the tech and mainstream
press. The announcement was a battle cry in
what is shaping up to be a fierce competition among online service
providers for the attention of third-party app developers.

Although their business models differ, eBay, Amazon, Google
and Yahoo have recognized the bottom-line value these developers
can bring to their platforms. As nascent phenomena such
as mash-ups and old-fashioned competition begin to blur the
lines between the markets these companies serve, their ability to
populate and maintain their respective developer communities
could be a make-or-break competitive advantage. "All of these companies want to leverage the ingenuity of thirdparty
developers to monetize their platforms," says Neil Macehiter,
research director at IT industry analyst firm Macehiter
Ward-Dutton. "To do that, they must establish, grow and nurture
developer communities."

The basic business model of both eBay and Amazon is predicated
on driving transactions through their platforms. Google
is all about driving searches to generate advertising. Yahoo is a
Web portal. However, the Web's evolution is making it possible—some say inevitable—for these companies to branch out beyond
their initial business models.

Exactly where this evolution will allow them to go, and how they'll
profit when they get there, is still not clear. The questions about
business models for ecommerce platforms aren't anything new.

As Allan Vermeulen, then CTO of Amazon.com, put it in his
keynote address at the 2003 Web Services Edge conference: "The
connectivity is in place, the basic standards are sufficiently agreed
upon and the building blocks of distributed software exist.

What's needed now above all is a workable economic model so
that companies like Amazon and Google, who now expose their
platform through Web services...can figure out how best to encourage
people to use the platform in new and innovative ways
that ultimately monetize for them and for us alike."

Architecting your future

Smart developers are more like architects, asserts Ron Schmelzer, senior analyst and founder of IT advisory firm ZapThink. “If you intend to continue to be a developer in the future, you are going to have to learn to build to loosely coupled service contracts,” he says. “If you don’t feel comfortable doing that, you may find that your opportunities will become more limited over time. My best advice: Become an architect. If you’re a developer, you cannot go wrong learning architecture.”

Lexicon of change

Developers’ skill sets and the idea of what software is will be transformed with the new generation of Web-based services. The definition of “platform” is changing to encompass online marketplace technologies. The evolving Web standards on which they rely, and the shift toward service orientation are altering the meaning of “application.” “If you were to ask me 5 years ago what an application is,” Schmelzer says, “I might have said that it’s something you install that has a combination of business logic and application functionality. Ask me today, and I’d have to say that it’s purely business logic. I think the application now is separate from what makes the application work.”

—John K. Waters

Buying into eBay
"The reality is, none of these companies—eBay, Amazon or whoever—can focus on every single piece of functionality or satisfy
every single customer," says Greg Isaacs, director of the eBay
developer program. "By opening up your platform to third parties,
you allow people to build the customized products that extend
the platform in ways that you couldn't have imagined, or if
you could have imagined, would never have gotten to. I think a
lot of the companies out there are following our lead in terms of
seeing the power of this type of platform."

The eBay Developer's
Program, launched in November 2000, is one of the largest and arguably most mature of the new developer
communities. eBay claims a current
membership of about 21,000, which is
twice the number on last year's roster.
The program provides individuals, businesses
and third-party vendors with
tools to develop solutions they can integrate
with eBay's core technology. eBay
estimates sellers generate between 40
and 45 percent of the company's listings
using their APIs.

Vendio started developing products
for the eBay platform before there was
an eBay developer community. The company
(formerly known as AuctionWatch)
makes and sells a suite of sales management
services for online retailers. It's
probably best known for its popular Vendio
Gallery, an interactive applet that allows
eBay sellers to display pictures and
links to items in their inventories.

"When we first got started, we were essentially
a message center for sellers," says
Mike Effle, Vendio's EVPof sales management.
"The sellers would get together and
kvetch about things they didn't like and
talk about things they needed. Suddenly
we realized that there was this huge need
for services to help automate a lot of
processes. So we started building them."

Vendio began working with eBay in
2000, when it first started building its
APIs, and then became the first licensed
member of the eBay developer program.
With a 60-person development team serving
tens of thousands of sellers, Vendio is
now the largest third-party supplier of seller
services on eBay. Vendio also supports
sellers on Amazon, Google and Yahoo.

"I think the word that gets thrown
around a lot that's not always so well
understood is 'ecosystem,'" Effle says.
"There needs to be mutual support between
the core platform that you're developing
for, the customers that you are
essentially sharing and the interfaces
that exist to make it all happen."

New skills and new drills
Creating APIs and making them available
to third-party developers is one of
the oldest strategies in the software business.
However, as they employ that strategy,
these ecommerce companies are
helping carve a new software development
paradigm, says Rob Enderle, principal
analyst at The Enderle Group.

"It's a next-generation model," he says.
"The first generation was based on big,
centralized, monolithic mainframes. The
second generation was distributed desktop
computers. This third generation is
a different beast. We're talking about
large back-end systems again, but largely
based on technology that came out of
the PC world. It's kind of a blending of
the two with a concept of collaboration
and openness thrown in."

Essentially, the Web has become a development
platform, Macehiter says. "You've got a set of services delivered on
the Web—whether it's mapping services,
search services, commerce services—through these APIs, which are based on
industry standards, like Web services or
XMLover HTTP. That means that people
can actually start combining different
services to create new capabilities."

They access eBay, Amazon and others
provide to their core technologies, along
with the support and incentives offered
in their developer programs, present developers
with a broad range of opportunities.
To exploit those opportunities,
they'll not only need a specialized skill
set, they'll have to adopt a more architectural
view of their apps.

Supports: Third-party developers building applications on the “sforce” platform that extend Salesforce.com’s CRM using Web services.

Provides:

A free Salesforce.com Developer Edition account

Free access to the sforce Web services API

Free toolkits, sample code and IDE plug-ins

Instructor-lead Sforce training and workshops

Java and .NET “getting started” packages

Monthly technical notes

Developer newsletter

AppExchange, a Webbased app marketplace where for Salesforce.com users can shop for thirdparty apps and add-ons.

Worries both ways
The relationships between developers and
ecommerce platform companies carry
risks for both sides. For the eBays and Yahoos,
there's a danger that developers will
"game the systems," Enderle says. "The retailers
are often compensated based on a
series of metrics," he explains. "Sometimes
it's the number of Web-page hits; sometimes
it's the duration or some other quantifiable element. The more competent
some of these [developers] get, the more
capable they are at maximizing their incentive
returns without necessarily providing
the connected value. Gaming some
of these services will undoubtedly become
one of the next big careers."

For developers, there are the usual
risks associated with being tied to one
platform. Another concern is none of
these companies has been supporting
third-party developers for long. "The
truth is, they're all pretty new at this
stuff," Enderle says. "They're really just
figuring out how to support these thirdparty
developers. The developer should
keep in mind that they're dealing with
well-meaning people who haven't learned
how to do this yet."

Vendio's Effle believes the new developer
communities, young as they are, already
have become an essential support
system for the third-party software makers
building solutions for these platforms.
He concedes it's a complex relationship,
and the boundaries can get blurred.

"Most third-party developers don't
want to become external R&D for any of
these platforms," he says. "We're not developing
on this platform to give away
our competitive edge. We're not in the
idea-germination market. We want to
support our sellers as much as possible.
We want to provide them with unique
applications that make their lives much
easier--and of course recoup the investment
we made to provide that application,
which is what everybody wants."

“We definitely look at the Web as a development platform,” says Infopia’s CEO Bjorn Espenes. “The challenge is to leverage all of the components that exist out there and create specific benefits for our clients. It’s the development paradigm of the future.”

Infopia’s product Configurator, which won eBay’s Most Innovative Application award in 2004, is a Flash-based app that interfaces via XML to an Oracle inventory database. Configurator is designed to be embedded in an eBay auction listing. The seller can then use the product to up-sell and cross-sell from within the eBay listing. Inventory is presented within Configurator based on what is currently in stock, and prices are updated, added and presented to the buyer in real-time based on the seller’s preferences.

“There has always been an active dialog between eBay and us,” says Espenes. “Sometimes eBay will come to us and ask if we can help them with developing certain features or functionality to use for the platform and that may be driven from them internally, or from a seller on the platform that has a specific need.”

Cranking out Internet applets

Espenes credits his company’s CTO, Eric Maas, with crafting the architecture and methodology that allows Infopia’s six-person development team to “crank out unbelievable apps very quickly.”

“This is what we’ve been doing since the company was founded,” Maas says. “So we have a lot of in-house expertise built up. Our products have always been built to integrate with these different platforms and create applications off of them, exposing our clients’ product base to the Internet, and basically doing things that didn’t exist until we came along.”

Although Infopia develops apps for other ecom platforms, Maas believes eBay’s APIs are the best available. “Their API is as stable as our code base,” he says. “When we are integrating with it, we’re not worried about not understanding how it works, or inconsistencies, or bugs. It’s a very solid platform that enables us to build enterprise-level applications.”

Maas continues, “That’s the benefit of having such a large base and so many platforms integrating with it—software, OSes, different types of communication and,” he adds, “that makes it possible for a company like ours, which can see these creative new ways of doing business, to actually implement them, and rest assured that they will work.”

—John K. Waters

Analyst Macehiter advises developers
to do background research before getting
involved with any developer programs. "I'm not talking about theoretical
research," he says. "Reading lots of
manuals won't do. You need to investigate
the sorts of services that have
proved to be successful on the Web. Find
out what characterizes those services.
Look at the people who build third-party
solutions that sit on top of Google and
eBay and Amazon. Get out to some developer
events. And check out the blogs
associated with these development programs."
The blogs, he says, are particularly
rich sources of practical advice.

Vendio's Effle agrees. "The smart developers
ask themselves a lot of questions
before jumping into this environment,"
he says. "They are thinking about how
they can position themselves, asking,
'How do we protect our intellectual
property? How do we react to the incentives
that are put in front of us?' And
perhaps the most important question of
all, 'Who do we think is really going to
help us grow our business?'"

Finally, consider the revenue model. "There are no rules about how you can
make money in this environment," Macehiter
says. "You can come up with a nifty
service that does something really smart,
but can you monetize it? As with any development
effort, if you are going to invest
the time, the money and the resources
to build something, you have to
think about the revenue model."